Due to the rising price of crude palm oil (CPO), state oil and gas company PT Pertamina says it will cut the content of the commodity in its "BioSolar" product from 2.5 percent to 1 percent.
Pertamina director for marketing and trade Ahmad Faisal said over the weekend that with the CPO prices climbing to more than US$1,000 a ton, the company had found it difficult to retain current levels of CPO.
This is the second time Pertamina has lowered the biofuel content since BioSolar was introduced in 2006.
It was first launched with a mixed combination of 95 percent diesel and 5 percent fatty acid methyl ester (FAME), which is made from CPO. In April 2007, Pertamina lowered CPO content to 2.5 percent.
"With the budget we have now, it is impossible to maintain the business. We will hold the CPO level of BioSolar at 1 percent," Faisal said.
Pertamina data showed the company posted Rp 16.9 billion (US$1.8 million) in losses in the first quarter from its biofuel business unit. It incurred a loss of Rp 15.2 billion on the sale of its BioSolar fuel and another Rp 1.7 billion on the sale of BioPremium.
According to the latest figures from the Energy and Mineral Resources Ministry, Pertamina currently sells 1,150 kiloliters of BioSolar each day through 213 gas stations in Jakarta and Surabaya. BioPremium is only sold at one filling station in Jakarta and one in Malang, East Java.
Under the government's biofuel promotion plan, Indonesia will need to increase its biofuel use to 5.29 million kiloliters by 2010 and 9.84 million kiloliters by 2015.
Evita H. Legowo, the first secretary of the government's green fuel committee, said the government remained upbeat about the biofuel industry and would not rely solely on CPO, but also on other feedstocks such as ethanol.
Evita said ethanol prices in the global market were more competitive as compared to oil-based fuels, which have soared with the rise in global crude oil prices.